Wayfair convertibles hit market, trade ‘all over the place’; Akamai gains; Workiva down

By Abigail W. Adams

Portland, Me., Aug. 15 – One day after equities experienced their worst decline year to date, the convertibles primary market was able to price an upsized offering on Thursday.

Wayfair Inc. sold an upsized $825 million of seven-year convertible notes prior to the market open on Thursday. The new paper was volatile in high-volume trading.

The deals to hit the market on Wednesday remained active although they were moving in opposite directions.

Akamai Technologies Inc.’s newly priced 0.375% convertible notes due 2027 made minor gains on an outright basis as stock staged a modest rebound.

However, Workiva Inc.’s newly priced 1.125% convertible notes due 2026 continued to lose ground.

Equities were volatile throughout Thursday’s session with Beijing’s hostile response to U.S. president Donald Trump’s threatened additional tariffs weighing down markets yet better than expected retail data lifting markets up.

While equities closed the day relatively unchanged, there was “still plenty of carnage” in the market, a source said.

Investors seemed to be flocking toward the “put trades” in the convertibles secondary space, a market source said.

Many high dollar price convertibles were gaining on a dollar-neutral basis with investors buying them for their put feature in case the underlying equity tanks, the source said.

Wayfair volatile

Wayfair priced an upsized $825 million of seven-year convertible notes prior to the market open on Thursday at par with a coupon of 1% and an initial conversion premium of 32.5%.

Pricing came at the cheap end of talk for a coupon of 0.5% to 1% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Sources were surprised to see the deal price let alone see the deal upsized given the condition in the market on Wednesday.

However, Wayfair is a serial issuer of convertible notes, and the deal modeled cheap and priced at the cheap end of talk, sources said.

The new paper dominated activity in the secondary space.

The 1% convertible notes due 2026 accounted for $115 million of the total $157 million in reported volume about one hour into Thursday’s session.

The notes saw $156 million in reported volume heading into the market close.

The new notes were “trading all over the place,” a market source said.

The 1% notes traded as high as 102 and as low as par with stock off 2% to 3% early in the session.

The notes were wrapped around par in the mid-afternoon and traded as low as 99.75 heading toward the market close.

However, with Wayfair stock continuing to trade down during Thursday’s session, the notes were expanding dollar-neutral, a market source said.

Wayfair’s 1.125% convertible notes due 2024 were the next most actively traded issue in the secondary space with about $16 million in reported volume.

The notes were down another 4 points outright to 118.375 after dropping 10 points outright during Wednesday’s session.

Hedge players were most likely rolling into the new deal from Wayfair’s outstanding notes, a market source said.

If they left their hedges for stock in place when rolling into the new notes, it would minimize the downside pressure on the bonds, which would account for their relatively strong performance despite the decrease in stock, a source said.

Wayfair stock traded as high as $110.70 and as low as $106.04 before closing Thursday at $107.34, a decrease of 4.21%.

Stock was down more than 10% during Wednesday’s session.

Akamai gains

Akamai’s newly priced 0.375% convertible notes due 2027 were making modest gains on an outright basis on Thursday as stock recovered from Wednesday’s sell-off.

The 0.375% notes struggled above 98 on Thursday after closing the previous day at 97.625.

The notes were up about 0.5 point outright to 98.25 late Wednesday afternoon.

Trading of the new notes tempered on Thursday with only about $8 million in reported volume heading into the mid-afternoon.

Akamai stock saw a modest rebound on Thursday after shaving off almost 6% during Wednesday’s session.

Stock traded as high as $85.72 and as low as $83.90 before closing the day at $85.01, an increase of 1.11%.

Workiva down again

Workiva’s newly priced 1.125% convertible notes due 2026 continued their downward momentum on Thursday as stock continued to drop.

While the notes continued to trade down on an outright basis, they were holding up on hedge, a market source said.

The 1.125% notes were down another 1.25 points outright to 96 bid, 96.5 offered on Thursday, sources said.

They were changing hands at 96 in the mid-afternoon with more than $10 million in reported volume on the tape.

Workiva stock traded as high as $52.02 and as low as $49.36 before closing the day at $50.06, a decrease of 2.98%.

Mentioned in this article:

Akamai Technologies Inc. Nasdaq: AKAM

Wayfair Inc. NYSE: W

Workiva Inc. NYSE: WK

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